How Rising House Prices Affect Equity Release
Over the past few years, house prices have made a habit of dominating headlines across the world and especially in the UK.
Ever since the Covid-19 pandemic, house prices have either been rising faster than expected, cooling off, or defying forecasts altogether.
As a result of this, the value of property continues to shape the finances of millions of homeowners across the UK, whether you are a married couple in your fifties or first time buyer just starting out on the property ladder.
For those aged 55 and over, rising house prices open up a conversation surrounding equity release and what it might be able to do for you and for your family.
Across the majority of 2025, property values in many parts of the country have remained historically high [1]. Whilst house prices across the year have been relatively uneven and unsteady, the overall trend is clear – homes are worth considerably more than they were a decade ago.
For homeowners over the age of 50, this shift means that there are a few things to consider with the help of professionals which can often be overlooked without expert help.
In this article, we will explore how rising house prices influence equity release, the different opportunities equity release can create for you and for your family and the different risks to be aware of when it comes to equity release.
Understanding Equity Release in the Contest of Rising House Prices
Equity release allows anyone who owns a home worth over £70,000 and is aged 55 or over to access the money that is tied up in their property, without having to sell or move out of the home [2].
The most popular type of equity release is a lifetime mortgage, where homeowners release money from their home which they are then free to spend on whatever they want.
This money does not have to be repaid immediately. In fact, the equity release loan only needs to be repaid once the property is sold, usually after the homeowner passes away or moves into long term care [2].
The amount of money that you can release from your home depends on a number of different factors, including your age, health and the overall value of your property. This is where rising house prices come into play.
When property values increase, the amount of money you can release through equity release loans tends to rise.
In simple terms, a more expensive home means that you can release more, giving homeowners more flexibility when it comes to how much they can release, and when.
However, it is also important to understand that a house price increase can also mean certain borrowing limits, a rise in interest costs, inheritance tax and issues when it comes to long term affordability.
Below are just some of the things to consider if your house has recently risen in value and you are therefore considering releasing equity from your home.
Why Rising House Prices Matter for Equity Release
As discussed above, many people across the UK might have recently found out that their house price has increased.
Whilst this might seem like great news initially, there are a number of different implications, both positive and some negative.
This is especially the case if you are considering opting for an equity release loan. Some of these implications are explained below for you.
1. Higher Property Values means Higher Potential Borrowing
One of the most immediate impacts of rising house prices is an increase in the amount that you might be able to borrow through an equity release loan.
Equity release lenders and providers will calculate what is known as a loan-to-value (LTV) ratio based on age and the value of the property.
As the value of your house rises, so does your loan-to-value ratio and the amount you can borrow.
Let’s take a look at an example. If a homeowner’s property has increased from £300,000 to £450,000 over several years, they may find that they can now release up to 90% of the value of the property if they have paid off a significant amount of their pre-existing mortgage.
This means that they can now access a significant amount of money, even if their circumstances have not changed.
This can be appealing for anyone who wants to supplement their retirement income, clear any outstanding debts or mortgages, fund their home improvements, adapt their home for later life care needs or simply cover any rising lifestyle costs.
Likewise, people might opt to gift their money to loved ones.
As you can see above, rising house prices can unlock options that previously felt out of reach for many homeowners, whose wealth might be tied up inside of their home.
2. Better Flexibility in Product Choice
Higher property values can also mean that you qualify for more lenders, leading to a wider range of equity release products.
For example, some lenders have different lending criteria, whereas some lenders have more competitive interest rates, meaning lower loan-to-value ratios.
When a house rises in price and value, a homeowner will be able to choose from a wider variety of lenders and plans.
There are now more lenders than ever to choose from, all with different features such as voluntary repayments, drawdown plans or inheritance protection options.
If you are confused about which lender to opt for, then speaking to an equity release adviser can really help.
They will be impartial and will explain each loan in detail, so that you feel confident about what each loan means for you and for your family.
3. Compound Interest Still Applies
However, it is important to understand that there are also some negative implications of rising house prices. For example, it is important not to forget that compound interest still applies. Equity release loans, particularly lifetime mortgages, will usually involve compound interest.
Compound interest is a standard feature of all lifetime mortgages, and means interest is charged on both the initial loan and the interest that builds up over time.
Remember, your equity release loan continues for as long as you live as it only gets repaid once you pass away and sell your home. This means that the interest that builds up over these years could be significant.
It is important to understand that a higher initial loan due to increased house values can mean a larger balance to repay once you pass away or move into a care home. It is important to look ahead in this situation.
For example, if property growth were to slow or stall in future years, the relationship between your new house value and outstanding loan balance becomes incredibly important.
This is why if you are considering taking out an equity release loan, then you should also look ahead to the future to ensure that what you are doing is sustainable.
It is also important to understand that if the proceeds from the sale of your home does not cover the loan amount when the time comes to sell, your property will be protected by the no negative equity guarantee.
This guarantee ensures that even if your home decreases in value and does not cover the loan amount with its added compound interest, then you nor your family will be liable to pay off the difference. It is your lender who will pay off the difference in full.
This is a standard feature of all equity release loans as outlined by the Equity Release Council.
4. The Impact on Inheritance
One of the biggest concerns homeowners who are considering equity release face is how equity release will affect what they leave behind to their loved ones.
Rising house prices will increase the overall value of the estate. In some cases, even after repaying the equity release loan, there may still be inheritance and equity remaining which will then go to your loved ones.
However, higher borrowing might result in little to no equity being left for your loved ones.
It is important to understand that releasing more money simply because you can does not always make sense, especially when it comes to the inheritance that you plan to leave behind to loved ones.
There are a number of different features currently being offered by a range of equity release lenders, such as inheritance protection. However, this might also influence how much can be released in the first place.
If you are considering releasing equity from your home but are worried about what that might mean for the inheritance that you plan to leave behind, then it is important to speak to a qualified equity release adviser about your concerns.
Likewise, it is also important to speak to your children and loved ones about the implications opting for an equity release loan might mean for them and their future inheritance.
Regional House Prices and Their Role on Equity Release
It’s important to understand that rising house prices is not the same thing for different parts of the UK.
Houses are valued completely differently depending on where you are in the UK, and growth rates vary widely between regions, cities and even postcodes [3].
Homeowners in areas that have seen significant growth may have considerably more equity than those in parts of the UK where house prices have remained relatively flat and steady.
This regional variation means that there are different eligibility criteria for equity release depending on where you are in the UK.
Likewise, where you are in the UK will likely impact the competitiveness of interest rates offered and the overall cost-benefit balance of opting for an equity release loan.
For those homeowners who have seen significant house price rises, equity release can provide access to funds that far exceed their original house price.
For others who are experiencing more modest growth, they might be met with less competitive loan-to-value ratios and less money available to release.
Should I Release Equity or Simply Downsize?
This is a very common question those considering release equity from their home ask. Rising house prices often mean that people are stuck between opting for equity release and simply downsizing their property.
When homes are worth more, selling and moving to a smaller property can free up equity and funds and mean that you can avoid interest costs altogether.
However, downsizing is not suitable for everyone. For example, a lot of people aged 55 or over have an emotional attachment to their home that they have likely lived in for years.
Likewise, over that time they have most likely built up local support networks, and the practical challenges of moving later in life can outweigh the financial benefits.
Likewise, the cost of moving is also rising, with solicitor fees higher than ever and the inevitable stamp duty that you will most likely have to pay.
Equity release offers an alternative. Equity release allows homeowners the chance to remain living in their beloved home, whilst being able to spend the equity that is inside their home on whatever they want.
Conclusion
Predicting the housing market is incredibly difficult. Whilst some lenders and specialists are predicting that house prices across the UK will continue to rise over the coming months and years, others predict that things might come to a halt.
For those who are considering equity release, the important thing to remember is to always seek professional advice from an equity release adviser before signing on the dotted line.
For better or for worse, rising house prices have undoubtedly reshaped the equity release landscape, making it more prominent and more appealing for lots of homeowners to release equity from their home.
However, with this comes more responsibility, both for homeowners and for lenders to make the right and sensible decision.
At Equity Release Warehouse, the good news is that we will always provide you with the very best advice and support, no matter what your situation.
If you contact us regarding equity release, our advisers will ask you a number of questions up front about the value of your property, your age and health as well as the condition of your property.
During these initial conversations, it is incredibly important to be open and honest, so that we can estimate how much you might be able to release from your home using our very own equity release calculator.
To talk with a member of our team about an equity release plan, then call our friendly and helpful team for free by calling us on 0330 058 1579 or by visiting us online by searching for us online at www.equityreleasewarehouse.com.
References
[2] https://www.thetimes.com/money-mentor/mortgage-property/equity-release/best-equity-release-companies
